Episode summary
What to Buy in the Momentum Stock Slaughterhouse | TCAF 228
Ask The Compound
· · 1 hr 24 min · Hosts: Michael Batnick, Josh Brown · Guests: John Mowrey
Summary
John Mowrey argues that the recent selloff in software and momentum names is less about a broad market breakdown and more about a violent valuation reset inside a crowded, highly owned corner of the market. He says the market is increasingly treating AI-disrupted software as an anti-bubble, while money rotates toward areas that look harder to disrupt, including energy, financials, consumer staples, and healthcare.
A large part of the discussion is about how traditional value investing broke down after 2008. Mowrey says factor decay arrived as ETFs, passive flows, and new index leaders turned what used to be alpha into beta. At NFJ, he responded by rebuilding the process around peer groups, relative valuation, and distributions of multiples rather than blunt cheap-vs-expensive screens. He argues that companies should be judged against the right economic peers, not just by GICS labels or market-wide P/E ratios.
The panel also explores whether the current tape is bullish or bearish for the rest of the market. Mowrey is cautious on software but constructive on parts of the value complex because fundamentals in refiners and regional banks are improving. Josh Brown argues the wipeout in AI winners is bullish because it opens room for other businesses that cannot be easily disrupted.
Key takeaways
- John Mowrey says factor decay after 2008 helped break old value screens, because passive flows and ETF growth turned former alpha sources into beta.
- Mowrey’s process now relies on customized peer groups and five metrics, including enterprise value-to-sales, price-to-book, dividend yield, P/E, and momentum.
- Mowrey thinks the software selloff is a real multiple reset, not a clean bottom-fishing setup, because there is no near-term proof point to resolve the disruption debate.
- Mowrey remains constructive on refiners and regional banks because their earnings trends and yield-curve backdrop are improving from depressed starting points.
- Josh Brown argues the AI/software liquidation is bullish for the broader market because capital is rotating into businesses that are harder to disrupt.
Notable quotes
“factor decay is a big deal because when I joined the firm I actually joined doing back testing”
“we have 120 years of experience people sum total”
“I think we have an anti-bubble going on”
“I think this is like unbeliev First of all, it's poetic justice”
How the episode opens
See here. — So, I went to Dallas last year for the first time in my life, believe it or not. — Oh, really? — I just like I don't know. It just missed it. — What' you think? — Um, — Is it the first time you What did you
I know it's like a gigantic city. I did not go to the right part. — Ah, so were you in uptown or downtown or Plano or — I was downtown? I believe — Downtown is it's the craziest thing. Downtown is dying.
Matter of fact, I was by it was by where county was shot. — Oh. Oh, yeah. Sure. Um, — Yeah. And that's not the best, — But even sort of a little bit on — It was a five minute walk there. Yes. But it was like sort of on the highway. And I tried to like go in and see a few places, but um
I was like, "Huh?" — Yeah. — And then I spoke to a few people that are like from the area. They're like, "This is like not — Not the area you stay." — I was like, "All right, I will." Because I'm a I'm a I like almost every city I go to. I'm like very easily impressed.
Where are you from? — Here. — Oh, you're from New York. Okay. — But I'm not one of those people that like will go to like like I I I've been to Milwaukee three times and I love it. Man City. Yeah,
I was blown away by Pittsburgh. — Yeah. — Like I I can't I'm sure there's been a cities I'm like, "Yeah." But um but yeah, I just I was like, "This can't be Dallas.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- momentum crashes
- software stocks selloff
- value investing
- bear market measurement
- bitcoin crypto crash
Companies and tickers mentioned
- WisdomTree
Watch the episode
Watch “What to Buy in the Momentum Stock Slaughterhouse | TCAF 228” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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